Over Half of Japanese Firms Plan Zero % Wage Hikes

Looking for wage inflation? You will not find it in Japan, and arguably not in the US either.

Japan's Prime Minister Shinzo Abe seeks a 3% wage hike to stymie deflation. The call goes unheeded as Over Half of Japanese Firms Plan No Base Pay Rise This Year.

In a monthly Reuters Corporate Survey, just less than half [of Japanese companies] said they would raise pay and most in this group said the increase would be similar to last year’s level of about 2 percent.

In the past four years, major companies agreed to raise wages about 2 percent at annual wage negotiations with labor unions, a benchmark that sets the tone for talks across the country. The bulk of that - about 1.8 percent - comes automatically under Japan’s seniority-based employment system. Anything beyond that is a hike in “base pay.”

But many firms are wary of raising wages as it commits them to higher fixed personnel costs, so they prefer to pay one-off bonuses instead.

The survey was conducted between Jan 31 and Feb 14 on behalf of Reuters by Nikkei Research. Of some 240 companies that responded, 52 percent said they would not raise base pay. “It would leave a burden when the business environment turns for the worse,” wrote a manager at a transport equipment maker in the survey.

The remaining 48 percent said they intended to raise base pay, but 76 percent of this group said the rise would be the same as last year. About 14 percent saw pay rises exceeding last year, while 10 percent said they would undershoot last year’s increase.

In Japan, base salary accounts for the bulk of monthly wages. Rises in base pay had been virtually frozen since the early 2000s amid persistent deflation.

Basic Wage Hike Math

If 50% raise by 2% and 50% by none, the average is 1%. However, we do not know how those hikes are distributed.

Is it the large companies or the small ones offering 0% hikes?

Here's the deal: If Japan hikes wages, the cost of its products will have to rise. If wages in the US rise and Japan's don't Japanese cars and other goods will be more competitive.

But that's looking at things in a vacuum. The US dollar has been falling. Japanese products already cost more.

I have a musical tribute

Nothin' From Nothin'

Such is the nature of competitive currency debasement.

For the situation in the US, please see How the Fed's Inflation Policies Crucify Workers in Pictures.

Mike "Mish" Shedlock

Comments (11)
No. 1-11
ReadyKilowatt
ReadyKilowatt

I'm pretty sure the only way to get a raise in the US these days is to take a new job. But you had better be a good negotiator if you're moving into a place like Denver. A first time homebuyer or renter doesn't stand a chance when competing for housing with the influx of Californians.

Carl_R
Carl_R

If there is deflation, even a 0% wage increase is a pay hike in that it will buy a higher standard of living. A wage hike of 2% combined with a 1% deflation would double your standard of living every 23 years. Unless there is also a 3% increase in productivity every year, in the long run that will crush Japanese businesses.

RonJ
RonJ

" Of some 240 companies that responded, 52 percent said they would not raise base pay. “It would leave a burden when the business environment turns for the worse,”

RonJ
RonJ

$15 an hour minimum wage will leave a mark in the coming downturn as well.

RonJ
RonJ

"But that's looking at things in a vacuum." As we all know, nothing happens in a vacuum. For each action, there is an equal and opposite reaction.